Congress’ Latest ACA “Replacement” Plan Falls Far Short

Congressional Republicans are reportedly adding to an initial plan to repeal and “replace” the Affordable Care Act (“ACA” or Obamacare), which will result in fewer people being able to afford insurance—especially low- and moderate-income individuals—and insurance plans that cover less.

The plan certainly fails to live up to President Trump’s vow that the ACA replacement will provide “insurance for everybody” that is “much less expensive and much better.”

A final bill draft is not available yet, and the U.S. House GOP is still working to reach a consensus (the U.S. Senate has not weighed in yet). The two documents we have available today–a messaging document and a leaked bill draft–may not mirror what lawmakers will ultimately introduce, but they reflect intentions and discussions of House leaders up to this point.

In this post, we’ll look at key provisions related to private insurance in the latest House repeal and replace documents. We’ll discuss proposed Medicaid changes in a separate post.

Premiums will become unaffordable for many lower-income consumers, especially older individuals, causing people to lose coverage. The ACA’s subsidies today are based on income. Poorer people get the most help and, as income grows, subsidies shrink. The latest ACA repeal plan ends the ACA premium subsidies and creates a tax credit starting in 2020 that varies only by age, not income. In other words, a family making $300,000 a year and another making $30,000 would get the same tax credit. The tax credit is $2,000 for people under age 30 and tops out at $4,000 for people over age 60 and is available only for people buying individual market insurance. The plan also increases premiums on older participants compared to today by allowing the oldest participants to be charged five times what the youngest participants pay (today, that difference is limited to 3:1). In other words, older participants will pay five times what younger participants pay, but they will only receive a tax credit twice as large. A just-released Kaiser Family Foundation analysis shows that the average tax credit under the House plan would be much lower than under the ACA, and that consumers who are both older and low- or moderate-income will be hit the hardest.

An analysis of the plan shared over the weekend at the National Governors Association meeting showed that federal funding for insurance subsidies in states like Texas that did not expand Medicaid could be reduced by 80 percent and that enrollment in the individual market could decline by 50 percent. In Texas, 1.8 million people rely on individual market coverage today, meaning proposed changes to subsidies could cause 900,000 Texans to lose their insurance.

Lower-income consumers will lose protections against high and growing out-of-pocket costs, but upper-income consumers will get new help with out-of-pocket costs. The latest U.S. House ACA repeal plan also ends the ACA’s cost sharing subsidies that lower deductibles, copays, and out-of-pocket maximums for lower-income enrollees, and does not replace that provision. In other words, the plan has no means of ensuring that low- and moderate-income enrollees who manage to maintain coverage will be able to afford their out-of-pocket costs, erecting substantial barriers to care.

The plan lets people shelter more than twice as much money in Health Savings Accounts (HSAs)—tax-advantaged accounts in which individuals can save money to pay out-of-pocket health expenses if they have a high-deductible health plan. HSAs are of little or no value to most low-income people. These accounts benefit only those who can afford to put in money, and the size of the tax benefits they provide is significantly larger for families in higher tax brackets. There are no provisions in the bill to directly fund HSAs for low-income enrollees. The only public funding available for HSAs occurs if a person’s premium tax credit exceeds their cost of coverage; the excess can be deposited in an HSA. However, some analysts expect the tax credit won’t fully cover premiums for many enrollees, eliminating the potential for HSA help.

People who have gaps in coverage will have to pay much higher premiums. The plan repeals the ACA’s individual mandate and replaces it starting in 2019 with a 30 percent surcharge on premiums if people have a gap in coverage of more than 63 days. The 30 percent surcharge would last for 12 months and apply to the individual market insurance and people who get insurance through a small employer. Unexpected gaps in coverage are common when people change jobs, move, age out of eligibility for their parent’s coverage or Medicaid, divorce, or experience the death of a spouse or parent. Gaps in coverage also happen when people become so sick they can’t work. Recent testimony to Congress from the American Cancer Society Cancer Action Network notes that 40-85 percent of all cancer patients must stop working for up to 6 months when receiving cancer treatment. The proposed surcharges will penalize patients who lose both their job and their insurance coverage when they are too sick to work by making future coverage unaffordable.

Insurance will cover less, leaving enrollees on the hook to pay for needed care. The plan repeals the ACA’s Essential Health Benefits (EHB) in 2020. EHBs ensure a decent level of coverage in plans and ended gross disparities in the quality of coverage between larger employers and small employer/individual market purchasers. EHBs ensure that small businesses and people who buy directly in the individual market get plans with mental health, maternity, prescription drugs, emergency care, and other needed coverage.

“State Innovation Grants” are offered up as an insufficient substitution for ensuring affordable coverage and consumer protections. The plan establishes grants to states starting in 2018 that could be used to fund high-risk pools, reinsurance programs, cost-sharing reductions, programs to promote preventive services, or other initiatives. The leaked draft bill appropriated $15 billion in each 2018 and 2019 and $10 billion a year after that. That amount would be divided among states, and states would have to put up matching funding starting at 7 percent in 2020 and growing to 50 percent in 2026. The state of Texas has never appropriated significant state funds for these types of activities to help expand or improve private health insurance, calling into question whether Texas would be willing to put up the required match.

High-risk pools have been tried in most states, including Texas, and failed to provide broad access to affordable coverage. Texas’ pre-ACA high-risk pool (which received no state funding) was woefully inadequate. Plans had deductibles as high as $10,000 a year, coverage was subject to a pre-existing condition waiting period, and premiums were expensive–set at twice the rates in the regular market for the vast majority of enrollees. At its peak, the Texas high-risk pool covered around 30,000 Texans, but did not provide access to roughly 6 million uninsured Texans, many of whom would have been unable to afford the pool’s expensive premiums.

In short, the most recent Congressional ACA replacement plans that are public at this point do not ensure better or more affordable coverage, and provide much less help for lower-income consumers. For readers who want more detail, Tim Jost summarizes the leaked House ACA repeal and replace bill at the Health Affairs Blog.

Stacey Pogue joined the center in 2008. She focuses on health policy issues. Before coming to the center, she did health policy and research work with the Medicaid and CHIP Division of the Health and Human Services Commission and the Texas Department of Insurance. In 2010 and 2011, she was selected to serve as a funded Consumer Representative to the National Association of Insurance Commissioners (NAIC). Pogue earned a Bachelor of Science in Geography, summa cum laude, from Texas A&M University in 1997 and a Master of Public Affairs from the LBJ School of Public Affairs at The University of Texas at Austin in 2005.